Need to cut through smokescreen

In the political debate that raged over the closure of Norsk Hydro’s Kurri Kurri plant, there is an elephant in the room that neither Labor or the Coalition wants to talk about.

Unless something highly unusual happens in the next 12 months, the Coalition will win the next election and will repeal the carbon price scheme. A growing number of businesses are now factoring this very real possibility into their investment decisions and valuations – such as AGL in its plans to buy Loy Yang Power.

The prospect of a low carbon price over the next 10 years is also leading to revaluations in the power sector.

So it is somewhat curious that Norsk Hydro is now citing the carbon price in its decision to close its Hunter plant. Why not wait for another 12 months to see what happens at the election?

The reality is that the Kurri Kurri plant is the oldest in NSW – over 43 years old – and faces additional electricity costs of $30 million after many years of power subsidised by the state. It also has been able to obtain a long-term power supply contract to 2027.

Even without a carbon price, the long-term decision of whether to spend millions upgrading an ageing plant in a country or invest in new plants in countries with access to low-cost power – such as hydro – would have been clear cut. Deliberate references to the carbon tax are a smokescreen.